Constellation frees up capital after collateral error
NEW YORK, Aug 28 (Reuters) - Constellation Energy Group (CEG.N) management told analysts that it has taken steps to shore up its liquidity after alarming investors earlier this month with a ratings-related collateral scare.
Constellation said in a quarterly report on Aug. 11 that it had underestimated by $1.6 billion how much collateral it would be required to post in the event its credit ratings were cut three notches into junk territory.
In its annual analyst meeting on Wednesday, company management said the error has been corrected, Gimme Credit analyst Philip Adams said in a report on Thursday.
Steps taken to free up capital and increase its liquidity include making an agreement for an additional $2 billion credit facility and planning to sell its upstream natural gas assets, he added.
The energy company will also seek to sell, recapitalize or attract third-party capital for its international coal and freight commodities business, Adams said.
The cost to insure Constellation's debt with credit default swaps fell 7 basis points on Thursday to 175 basis points, or $175,000 per year for five years to insure $10 million in debt, according to Markit Intraday.
The swaps had traded at a record high of 298 basis points on Friday, Markit data shows.
Constellation said it has obtained a commitment for the $2 billion, unsecured credit facility through the end of 2009, Adams said. The company also plans to extend the maturity of all or some of its $1.4 billion of credit facilities that expire at the end of 2008, subject to progress in making its asset sales, he said.
(Reporting by Karen Brettell; Editing by Kenneth Barry)
